The GST will truly be a game-changer as the new indirect tax regime would, most observers say, boost GDP growth by at least two per cent
The GST will truly be a game-changer as the new indirect tax regime would, most observers say, boost GDP growth by at least two per cent
It goes to the credit of Union finance minister P. Chidambaram and Bihar deputy chief minister Sushil Modi, chairman of the empowered committee of state finance ministers on the Goods and Services Tax, that the two main hurdles — the compensation formula for Central sales tax and the design and nitty-gritty of GST — have been removed.
At the two-day meeting to thrash out contentious issues, the empowered committee got the Centre and state governments to agree to the compensation formula under which the Centre will pay Rs 34,000 crores as arrears for three years starting 2010-11 to the states. The GST’s design has also been approved by most state governments, and issues like how the GST will work in practice, on which several of them expressed fears, will be hopefully ironed out successfully by the three committees set up for the purpose.
The Centre has displayed tremendous maturity and goodwill in agreeing to put in place an alternative to the disputes settlement body that the states thought gave too much powers to New Delhi, and put in place a new mechanism for checks and balances. It is not impossible to roll out the much-awaited GST in the next financial year if both Mr Chidambaram and Mr Modi sit together and remove whatever other issues are left. The GST will truly be a game-changer as the new indirect tax regime would, most observers say, boost GDP growth by at least two per cent. The present multiple tax regime like Central excise duty, service tax and value added tax and a host of local taxes will be replaced by a single GST, which hopefully will reduce leakages and corruption in tax collection.
This is a goal worth striving for, and with the new era of cooperation with the Opposition initiated successfully by Mr Chidambaram and urban development minister Kamal Nath, it could be a win-win situation for all. Till Mr Chidambaram came on the scene, Mr Modi was literally pleading with the government since 2010 to start a dialogue with state governments, some of whom had legitimate fears. Most of them belonged to the Opposition, and Mr Chidambaram broke the ice with aplomb. Now the Constitution Amendment Bill, which is imperative for bringing in GST, is pending with the parliamentary standing committee, and another charm offensive may perhaps be needed to get it to speed up its work so that the next step of getting the bill passed in Parliament can begin.
